The Rally in GW Pharmaceuticals Should Continue - Here's How I'd Play It

In his second "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer spoke with Justin Gover, CEO of GW Pharmaceuticals plc  (GWPH) , the medical cannabis provider with shares that soared 9.1% Wednesday after the company posted earnings of 21 cents a share, when analysts were expecting it to only break even.

Gover said that over the past six months, more than 12,000 patients have received prescriptions for Epidiolex, GWPH's anti-seizure medication. Those prescriptions have generated over $100 million in revenue. Gover said there is still much education to be done with physicians, letting them know what Epidiolex is and how it works for their patients suffering with seizures. The company has been 20 years in the making, Gover noted, and the company is now delivering real medications based on real science. Real science takes time to do it right and that's what GWPH does. When asked about their pipeline, Gover said there are many potential uses for CBD-based products and his company is exploring opportunities for psychiatric uses and other neurological conditions.

Let's see how the charts of GWPH are shaping up.

In this daily bar chart of GWPH, below, we can see the recent test of the rising 200-day moving average line. It looks like today GWPH will close back above the declining 50-day moving average line on heavy volume.

Overall the On-Balance-Volume (OBV) line is mostly positive and the Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside for a cover shorts buy signal.

In this weekly bar chart of GWPH, below, we can get some perspective on the price action. Prices have mostly trended higher the past three years. Prices look like they have just survived a test of the rising 40-week moving average line.

The weekly OBV line shows a bullish trend the past two years or so and it is close to making a new high for the move up. A new OBV high soon for GWPH would probably be a leading indicator and foreshadow new price highs.

The 12-week price momentum indicator looks like it will soon turn positive.

In this Point and Figure chart of GWPH, below, you can see the recent strong rally without the price gap yesterday. The software is now projecting a possible upside price target of $230.24 which would be a new high for the move up.

Bottom line strategy: The recent move up on the charts of GWPH looks like it will be sustained. Aggressive traders could try to buy a dip to around $170 if available and look to add to longs above $190. Risk a close below $150 for now. $230 is the price target.

Employees of TheStreet are prohibited from trading individual securities.